Philippines faced with mammoth challenge of typhoon recovery

Recovering from Typhoon Haiyan will be a huge challenge, writes William Dennis.

The Philippines faces a herculean rebuilding task in the worst-affected parts of the Visayas islands following the devastation caused by Super Typhoon Haiyan on 8 November.

Haiyan damaged or destroyed 1.14 million houses, with Cebu, Samar, Albay and Leyte provinces hardest hit. Cebu City is the second largest in the Philippines. Nearly 6,000 people are known to have perished, with up to 2,000 still missing. More than four million are displaced.

The Ministry of Finance in Manila puts damage and losses at an estimated US$15bn.

Socio-economic Planning Secretary Arsenio Balisacan said assessing actual damage and losses will take time. 'Our priority is to ensure lost ground is regained; implementation of social and economic development projects in the affected areas need to be accelerated,' he said.

The National Economic and Development Authority is spearheading a recovery and construction plan that involves building critical infrastructure such as roads, bridges, houses, hospitals, telecommunications lines, power plants, and water supply and distribution systems.

What is surprising is that the authorities are unable to say when work will start or how long it will take for the affected regions to get back on their feet. Lack of funds is a core issue here. The government has approved 40'billion pesos ($952,000), a fraction of what is needed.

Lack of insurance cover in most affected areas is certain to delay rehabilitation. Those whose businesses were destroyed either did not understand the need for insurance or did not want to pay the premium.

What is important is that there should be accountability and transparency in the use of money from foreign countries.

The only construction the Filipino government has started a month after the disaster is bunkhouses for victims in Samar, Leyte and Eastern Samar.

With agriculture and fishing the main livelihoods in these regions, thousands have been made jobless. Economically, the typhoon has also ruined Cebu's chances of expanding for outsourcing operations. The second city's bright prospects have now dwindled to just a glimmer of hope.

Despite the scale of damage and losses, Balisacan believes that 2013 fourth quarter Gross Domestic Product (GDP) could slow by only 0.3-0.8 percentage points. He says he is confident that GDP for 2013 will grow between 6.7-7 per cent after a first half growth of 7.6 per cent.

Leyte, which bore the brunt of Haiyan, was lashed by 313km/h winds and 7m-high waves that destroyed Daniel Z Romualdez Airport in Tacloban, the provincial capital. There were no aircraft at DZRA when Haiyan struck, but the control tower, instrument landing system and passenger terminal were badly damaged, paralysing commercial operations, and hampering military relief flights. DZRA was the gateway to eastern Visayas from Manila and Cebu.

As a precautionary measure, the authorities closed nine other airports for six days. With domestic flights scaled down, the five domestic carriers, Philippine Airlines, AirAsia Philippines, Cebu Pacific, Zest Air and Philippine Express estimate a combined loss of $33m on the affected routes for 2013.

According to the director general of the Civil Aviation Authority of the Philippines, William Hotchkiss, there is no indication when DZRA will resume operations, if ever.

CAAP needs $50m to cover the reconstruction of the control tower, terminal building and communications equipment. Restoring the terminal and the runway are added costs. But rebuilding the airport is not a priority of the government.

The disaster has brought to light some poor government procurement practices. For example, it was discovered that $416,000 worth of medicine procured by the Department of Health in Manila and held by several hospitals expired in 2012.

A copy of the Commission on Audit's report made available to E&T blamed overstocking and purchase of drugs near expiry. The report also stated that 1,583 packs of medicine DOH supplied to a certain hospital in April and October 2009 had expired in 2007.

Health undersecretary Ted Herbosa claimed that he had no knowledge of the issue, saying: 'I have yet to receive the report.'

Some aspects of life are returning to normal. The three mobile telecommunications providers have restored 85 per cent of services in the Visayas. Smart Communications, Digitel Mobile Philippines and Globe Telecom said the full spectrum of services will be restored by the end of December.

At this crucial time, external funding will be required for reconstruction of infrastructure. It does not help that some foreign companies are struggling to get back long overdue refunds.

As an incentive to foreign investors, equipment imported for business is not subject to VAT, but the amount has to paid and then claimed back. Henry Schumacher, external executive vice president for European Chamber of Commerce of the Philippines, said the government needs to provide guidance on how to get VAT refunds.

Takashi Ishigami, president of the Japanese Chamber of Commerce and Industry of the Philippines, stressed that the VAT refund system must be resolved once and for all for investors to get back their dues.